Thiel: Mariners buy ROOT Sports; set for big $

Rather than waiting to re-open their contract with ROOT Sports in 2015, the Mariners are buying the regional sports net, eliminating the middle man.

By buying a controlling share of ROOT Sports, the Mariners busted a move to help their financial picture. / Wiki Commons

Rather than waiting around until 2015 to reopen their 10-year contract with broadcast partner ROOT Sports, the Mariners re-opened it in a big way Tuesday — they bought controlling interest in the flagging regional sports network.

The cost of the deal was not announced, but a press release said the contract to televise Mariners games runs through 2030. DirectTV, the owner of ROOT, will be a minority partner and continue to provide its assets and operate under the ROOT brand. It will provide coverage of “other professional, collegiate and high school sports programming,” the release said.

Apart from cost, the deal is significant for the future of the franchise for at least three reasons:

It allows the Mariners to keep their own broadcast revenues, rather than take a flat fee of $45 million annually from ROOT over the contract’s 10 years, a deal that looked good in 2010 but weak in 2013;

The Mariners control their regional-game-broadcast fate, which can include building out their own sports network. Or it could sell the rights to the highest bidder, such as Comcast/NBC, which has the rights in Portland to the NBA Trail Blazers, or to Chris Hansen, the investor who proposes to build a basketball/hockey arena next door to Safeco Field to house the return of the Sonics, which could be decided Friday;

Should the club’s 55 percent owners, Hiroshi Yamauchi of Japan and Nintendo of America in Redmond, decide to sell the franchise, owning the broadcast rights substantially increases the club’s sale value.

“This is great news for the Mariners and for sports fans in the Northwest,” said Bob Aylward, Mariners executive vice-president for business operations, in a club release. “We are excited to continue our partnership with DirecTV Sports Networks in this new way. We are investing to own a majority share of the new venture, and committing our rights well into the future, confident that this will maximize the value of our television rights and, more importantly, provide the resources to remain competitive on the field for many years to come.”

DirecTV Sports Networks President Patrick Crumb said, “This is an opportunity to strengthen and extend our relationship with the Mariners for decades while continuing to leverage (our) overall resources and expertise for the benefit of our new partnership with the Mariners. This new structure will truly align our interests and allow us to work together to maximize the potential for the network and our coverage of Northwest sports.”

The release said New York investment bank Allen & Company advised the Mariners on this transaction, led by Steve Greenberg, who has extensive experience in the sports television industry. Greenberg said, “With the formation of this new regional sports network partnership, the Mariners have taken a significant step forward. MLB clubs that own a substantial stake in their own RSN’s tend to be among the strongest and most stable franchises in the league.”

The deal struck now clarifies the future should the Mariners be sold. The likeliest outcome is a shift of shares among current owners, as opposed to selling to outsiders. Chris Larson, who joined with Yamauchi in 1992 to buy the club, has highest portion of ownership, about 30 percent, among the 16 American minority owners. However, a divorce has curtailed his ability to buy the majority interest.

The owner who is likeliest to emerge is John Stanton, a wireless-industry kingpin and chairman of the board of Clearwire. Stanton also served as chairman and CEO of VoiceStream Wireless, which was later sold to Deutsche Telecom and became T-Mobile USA.

He purchased 10 percent of the Mariners from original owner John McCaw nearly a decade ago. He has the wealth, passion and acumen to make the Mariners successful.

“He’s in the Nordstrom mold of owner,” said someone who is acquainted with Stanton, referring to the widely praised original owners of the NFL Seahawks from 1976-88. “He’s smart, he’s low-profile and he loves baseball.”

As for ROOT, it was hit by the loss of all Pac-12 programming when the conference created its own network in August, and hurt by the long decline of the Mariners’ baseball fortunes, which included last-place finishes in seven of the past nine seasons. ROOT has had numerous layoffs in recent years. It produces little of what’s known as “shoulder” programming around live-game telecasts, and has a minimal online presence compared to other RSNs run by Comcast and Fox.

ROOT is one of three RSNs owned by DirecTV. The others are in Denver and Pittsburgh. But RSNs don’t really fit with DirecTV’s corporate direction as a content-delivery system, not a content creator or owner. A minority position in Seattle would create a passive role for DirecTV.

Since current Mariners CEO Howard Lincoln, 73, owes his position to Yamauchi, 85, who has never seen a Mariners game, he would probably retire upon sale. But for now, he has helped to negotiate a shrewd maneuver that puts the Mariners in a better position to exploit the TV-rights fee bonanza that has already benefited three rivals in the AL West: Anaheim, Texas and Houston.

And it means that if Hansen wants to help create a dynamic RSN for the Sonics, whenever they return, he likely would have to knock on the door of the Mariners and their valuable 162 games of programming. The club steadfastly opposed the location of Hansen’s arena, saying it would worsen an already bad situation with traffic and parking.

It might be a different story with the Mariners if Stanton were in charge. He owned a significant portion of the Sonics when they were sold to Clay Bennett in July 2006. He voted against the sale, but Howard Schultz won the board vote 5-4, which led to the Sonics departure to Oklahoma City after the 2008 season.

YourThoughts

jafabian

Smart move on the M’s part. What they should do now is increase their base, try and extend beyond Washington. There’s a lot of Mariner fans out there who’d love to see their broadcasts. But since they most likely would never deal with the Sonics could this mean sometime down the road we could see the return of the SuperChannel???

Trygvesture

Dumb me. How does he M’s purchase of Root implicate the shape-shifter’s share-shift? I don’t get it. Does it implicate any good news re: the hastened end of the Clownship era? Headline: Lincoln knits together pocket-lining for ownership while team meanders rootless through rebuilding. Again.

Matt

One could argue that the downfall of ROOT/FSNW began when the Sonics departed. In that sense, we’ve almost come full circle. Then, Fox sold the network to DirecTV, which has chosen not to expend the resources to make it anything other than a quasi-RSN. The loss of Pac-12 programming was only the most recent hit to the network, leaving ROOT almost totally dependent on the downtrodden M’s.
I’d like to think that the best thing for all potential parties would be to build up ROOT (M’s, please rebrand) into a must have for sports fans. That would mean including the Sounders and potential NBA/NHL teams. The more teams included, the more the net can charge per sub, and the more valuable it will be. Hansen will have incentive to deal with ROOT and avoid a Blazers/CSNW situation. I doubt this market can sustain multiple RSNs that are both pleasing to the fans and rewarding for the teams.

maqman

I wrote a piece for North and South of Royal Brougham in January suggesting the Ms do just this at this time, before a NBA or NHL team came to town. This allows them to avoid sharing 34% of their regional media rights income from ROOT with the other 29 MLB teams, they will still have to pay that but if they reduce what ROOT pays for their rights then ROOT becomes more profitable and the Ms don’t have to share those profits. If the Ms are smart, and believe it or not the suits know what they are doing, this will also allow them to add content and build their brand. Starting next year the Ms will see an increase in their share of the MLB national media sales from $25MM to $52MM. They were getting $45MM a year from ROOT, this move will not result in the team getting less than that. I believe the Ms have seen their last sub-$100MM payroll this year.

bugzapper

““He’s in the Nordstrom mold of owner,” said someone who is acquainted
with Stanton, referring to the widely praised original owners of the NFL
Seahawks from 1976-88.”

So what’s that make Herman Sarkowsky, chopped liver? In 1972, he and Ned Skinner formed an organization called Seattle Professional Football, which was created to bring an NFL franchise to the city.

In June 1974, after the NFL made known its ownership terms (any ownership group must include one entity with controlling interest in the team), Sarkowsky entered into a partnership with the Nordstrom
family in which the Nordstroms would have a 51% stake. The NFL granted
the Nordstrom/Sarkwosky consortium ownership of the new Seattle
franchise, which would be christened the Seahawks, in December of that year.

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